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The capital asset pricing model and the three factor model of Fama and French revisited in the case of France

dc.contributor.author

Lajili, Souad

dc.date.accessioned

2012-05-15T16:30:26Z

dc.date.available

2012-05-15T16:30:26Z

dc.date.issued

2002

dc.identifier.uri

https://basepub.dauphine.fr/handle/123456789/9237

dc.language.iso

en

en

dc.subject

Book to market ratio

en

dc.subject

Size effect

en

dc.subject

Asset Pricing

en

dc.subject

Fama and French Unconditional Model and Anomalies

en

dc.subject

Risk factors

en

dc.subject.ddc

332

en

dc.subject.classificationjel

G12

en

dc.title

The capital asset pricing model and the three factor model of Fama and French revisited in the case of France

en

dc.type

Document de travail / Working paper

dc.description.abstracten

Size and book to market ratio are both highly correlated with the
average returns of common stocks. Fama and French (1993) argue that these
eﬀects are proxies for factors of risk. In this study, we try to test the three factor
model of Fama and French and the Capital Asset Pricing Model on the French
Stock Market. We use returns on the six Fama and French portfolios sorted by
size and book to market ratio. The sample is taken from July 1976 to June
2001. Our results show that the three factor model explains better the common
variation in stock returns than the capital asset pricing model. Moreover, both
the CAPM and the three factor model do a good job in explaining the cross
section of stock returns. We test the three factor model with a set of market
portfolios and we show that all market portfolios capture the common variation
in stock returns. However, only the value-weight market portfolio can explain the
cross-section in the stock returns. Finally, we test the January eﬀet in the French
case and we show that there is no January eﬀect for both the dependent variable
(stock portfolios) and the explanatory variables(the market, HML and SMB)